Abstract

I ask why the same large shareholders have different investment horizons. Using data for 1998–2013, I examine four fundamental firm policies for their potential influence on blockholders’ investments with different time horizons. The panel ordinary least squares, difference‐in‐difference (using the Sarbanes‐Oxley Act), logistic, and dynamic generalized method of moments regression analyses reveal that blockholders adopt a short‐term horizon in smaller firms with a less independent board, high leverage, and high dividends while the same blockholders keep their investments longer in firms with a more independent board and low dividends. Under various economic conditions, different firm characteristics gain importance in blockholders’ decision on short‐term versus long‐term investments.

"This is the peer reviewed version of the following article: Tosun, OK. Why do large shareholders adopt a short‐term versus a long‐term investment horizon in different firms? Financial Review. 2019; 1– 38, which has been published in final form at https://doi.org/10.1111/fire.12198. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions."